The Department of Education recently proposed policies that detail how it will implement the new Income Based Repayment (IBR) and Public Service Loan Forgiveness Programs created through the College Cost Reduction and Access Act last year. These programs will limit monthly payments to manageable percentage of a borrower’s income, and forgive student loans for borrowers who choose a career in public service (click here to learn more).

While most of what the Department of Education has proposed is good, the proposed policies include two unnecessary and costly obstacles for borrowers. Borrowers interested in Public Service Loan Forgiveness would be left in the dark for years on whether their jobs count as eligible public service, and in IBR, some married borrowers would have to pay twice as much on their monthly payments.

Let ED know that they should remove these obstacles – take action now!

Dont forget to check out our Action Alerts Page to make your voice heard on other issues that matter! 

Campus Progress’s Erica Williams, along with the PIRGs and several other organizations, testified at the House Financial Services committee today on credit cards and student debt.

You can read her testimony here, and watch the hearing here. 

As you have probably heard by now, the “credit crunch” has been making the student loan market less lucrative for many lenders, and has caused a bit of a controversy in the world of higher education.

To recap – lenders are trying to argue that problems in the credit markets will lead to a crisis for students who need loans to attend school, while most others think that the affects for most students will be small. Congress and the Education Department have created new policies to make sure that, no matter what happens, students will be able to access financial aid, but lenders, who already receive government subsidies to make loans to students, keep pushing to get a sweeter deal for their bottom line (as opposed to sweeter deals for students or taxpayers).

I thought this new article in the Chronicle of Higher Education might help point to the difference between planning for the worst (good), and unnecessarily wasting taxpayer money (not so good):

As you have probably heard, we are going through some rocky financial times. A “credit-crunch” fueled recession means that many financial institutions will have a harder time making ends meet, and this, of course, includes student loan companies, as the Washington Post points out today.

Higher education advocates are worried that these lenders are exaggerating the effects of the crisis on the student loan industry as a way to secure unneeded bailouts and get back some of the wasteful subsidies that Congress cut last year in order to increase student aid. They are also worried that all of the hype will mean debt-averse students may be discouraged from “investing” in a college education. Don’t worry – it is very unlikely that you won’t be able to get the loans you need to finance you education.

The Center for American Progress and Campus Progress are pleased with today’s passage by the House of Representatives of the College Opportunity and Affordability Act (H.R. 4137). This legislation continues to build on Congress’s commitment to making college more affordable and ensuring that Americans are prepared to compete in an increasingly knowledge-based economy. 

An amendment has been introduced that would give important protections to private student loan borrowers.

Since student loan companies lobbied their way into the Bankruptcy Bill in 2005, borrowers have been virtually unable to discharge private student loans through bankruptcy. Instead of treating these loans like credit cards or any other form of consumer debt, they are treated more like a criminal fine. This leaves borrowers few ways to deal with what are often high-cost loans if they run into financial troubles.

Later this week, the House of Representatives is taking up its version of the reauthorization of the Higher Education Act - the law that governs almost every federal program and policy towards higher education. We have a chance, if we act fast, to change this situation. Rep. Danny Davis proposed an amendment that would extend bankruptcy protections to private loan borrowers. 

Please urge your representative to support the Davis Amendment

According to the Cincinnati Enquirer, two students have plead guilty to charges of aggravated robbery, saying that they did it for tuition money.

Are loans really so horrible these days that robbery is a better option?

Also, I think that this speaks tremendously to the state of college tuition and the burden of student debt. The students both attended school for under $10,000 a year, but increases in costs were still so overwhelming that they held up a bank.

Both of them face up to 20 years in prison. 

Phoebe Connelly has a great piece up on TAP today about the politics of personal finance advisors like Suze Orman:

Orman, who has held certification since 1986, champions personal responsibility. She is quick to chastise women who call in to the show confessing that their husbands handle the bills, and she regularly admonishes folks to get a second job when faced with debt, telling a woman on a recent show, "We are not the victims of our circumstances; we are the creators."

But lately, Orman has been changing her stance:

This summer Orman also brought her concern to The Suze Orman Show, starting two shows with segments on students who had been caught in the web of high student debt. In a switch from her usual format, in which callers are offered a 15-minute Orman fix-it plan, she presented two students as case studies in the pitfalls of education loans. She talked to Adam on Aug. 18, and asked about the interest rate on his private loan. He answered that it was 9.5 percent. "Thank you!" shouted Orman, "Nine point five percent. Shame, shame, shame on you lenders. Look at what you are doing to the future of the United States of America." And then she really let loose: "But here is the problem. … We can't do anything about it, because our great legislators have allowed these private institutions to be protected against you claiming bankruptcy."

You should go and read the whole thing.

California students today filed an unprecedented ballot initiative with the Attorney General that would freeze tuition increases at University of California and California State University schools for five years, and to tie tuition increases to the price of inflation after the freeze expires.

Not only does the new College Cost Reduction and Access Act raise the maximum award by at least $1,090 over the next five years, but the bill also makes student loans easier to pay back by cutting interest rates in half for subsidized Stafford loans, and protects borrowers by tying monthly payments to income. Finally, it encourages public service by expanding loan forgiveness programs for firefighters, teachers, and others in valuable but low-paying careers.

All of these important measures will be paid for by making the financial aid system more efficient, rather than from taxpayers. Campus Progress thanks Members of Congress from both parties who worked hard to make college more affordable for millions of young people. We thank the Congress for having the courage to cut expensive and wasteful subsidies to politically powerful loan companies like Sallie Mae and Nelnet.

Through our Debt Hits Hard campaign, Campus Progress looks forward to working with Congress, students, coalition partners in the Campaign for College Affordability, and state and university officials to continue to work towards access to education, student debt relief, and a financial aid system that works for students, not banks. A key priority now is addressing private loans – making sure that students obtain these more expensive loans only when federally guaranteed loans are exhausted, and that they can borrow on fair terms.

We encourage people who want to continue our momentum on these issues to enter our College Affordability Essay Contest now.

The Project on Student Debt just released its study on student debt levels for the class of 2006. It is worth checking out!

Graduates have the highest student debt in [drum roll]: DC and New Hampshire! DC also happens to have the most expensive school in the US. Hawaii gets good beaches, great weather, and graduates who, on average, have the lowest debt in the US. The Project on Student Debt put together a nifty interactive map again, so check out your state.

They also found that student debt levels have risen. The average debt load is now at least $19,646, and is probably closer to $21,146.

New video by Americans for Fairness in Lending:

You can find some ways to get involved on their website: http://www.affil.org/ybf.

Yesterday afternoon I participated in a blogger conference call with Senator Ted Kennedy about the soon to be passed Higher Education Access Act (HEAA). The bill will give an additional $20 billion in financial aid to students without costing taxpayers a penny by cutting excessive lender subsidies. That's the good news. The bad news is that an even stronger proposal, Student Aid Reward Act (STAR) stands no chance of passing, and Senator Kennedy was very frank as to why, saying, "Lenders are too powerful in the U.S. Senate -- I’m sorry to say, among Democrats as well as Republicans -- for that to get passed." STAR would create an incentive for universities to cut lenders and their wasteful government subsidies out of the program altogether by encouraging schools to switch to direct lending, in which the federal government provides the loans itself. So students and taxpayers will see a small improvement when the HEAA is passed, but will continue waiting indefinitely for more basic reform. You can read my recent Washington Monthly article on the higher education lobby for a more complete rundown of STAR and why it hasn't passed.

cross-posted on TAPPED.

Business Week has a back-to-school article that's a bit sobering. It reminds us how credit card companies sell their lending products to college students -- sometimes at rates as high as 16 percent:

Students also live in a culture of debt. Many of them are borrowing tens of thousands of dollars to go to school, tapping low-interest loans to pay tuition. "The primary way we help students pay for college is by telling them to take on more and more student loan debt," says Tamara Draut, director of the Economic Opportunity Program at Demos. The message is clear, she says: "Debt is O.K., and you are going to have lots of it." In that context, [Central Washington University student Seth] Woodworth and other students think little of charging another $50 for dinner or groceries.

I know I've linked to Elizabeth Warren's article in Democracy before, but it's worth linking to again. She explains how consumers have essentially abdicated all their negotiating power to big companies, who can refuse their products if customers don't agree to their ridiculous terms.

Lindsey Luebchow* points out that one college, profiled in Inside Higher Ed recently, proved that one-on-one counciling can help reduce student debt, and it's actually possible to pull it off:

As the Barnard [College] example shows, proactive counseling can go a long way in preventing students from making bad decisions that will haunt them well after they leave college. But are similiar efforts feasible at larger universities with enrollments that exceed Barnard's 2,400 students? 

The answer is "yes"—at least at Colorado State University, which enrolls more than 20,000 undergraduates and about 4,000 additional graduate students. For more than a decade, financial aid administrators at the university, which participates in the federal Direct Loan program, have been concerned about students unnecessarily taking out non-federally guaranteed, private loans. And they have been doing something about it.

As a school that is about 10 times as large as Barnard, Colorado State officials realized that they didn't have the capacity to contact each and every borrower who applied for a private student loan. Instead, they decided that they would target private loan applicants who have not exhausted their federal loan eligibility. When private loan applications come in, the financial aid office flags students who either have not filled out a FAFSA or already have federal loans but still have eligibility remaining.

*I accidentally originally credited this post to Sara Mead.

Via the Chronicle. It appears that in the latest development on student loans that students are more likely to sign on with devastatingly higher loan rates with private firms rather than fill out the (roughly) 20-page long federal aid form which offers lower rates. This is unsurprising to me. I remember filling out that form. It was painful, to say the least, and when private firms are offering forms where more or less all you have to provide is your social security number and your parents' address.